Directors Loan Account and Spongebob

[London Life]

I am about to follow the Spongebob plan
My DLA = £4k and overdrawn expenses at £3.5k (not sure how i managed to do this - but not important for this thread) so i owe the company £7.5k which would be company assets.
I have just enough personally to pay back the £7.5k which would go straight into paying back my personally guaranteed overdraft
The company overdraft is £22k.. This would then cancel out my debt to the company and also reduce the overdraft to £14.5k
My only creditor is HMRC (£19k)
Is paying back the £7.5k now a good idea - or should i wait to see if the OR is appointed and deal with it all then?

 

[Gavin Bates]

Hi

If you do as you are planning then you are converting a DLA due to the Company into a preference as you will have prefered the bank as compared to HMRC. Both can be chased by the OR or liquidator if they are appointed.

Regards

Gavin

 

[London Life]

thanks Gavin
just trying to find a way to reduce expenses as the interest on the overdraft is quite high every month.
Seems like the best option is to follow the Spongebob plan and see what happens in the end.
I actually want to start talking to the bank now so i get my life back in order. Seems this method keeps the bank debt open for a long time whist i wait for dissolution

 

[London Life]

what would happen if i pay back the £7.5 to reduce the DLA and then pay this to HMRC - would it buy time?

 

[Mr D]

what would happen if i pay back the £7.5 to reduce the DLA and then pay this to HMRC - would it buy time?

Again preference one creditor over another.

Split it between creditors. Or use part to pay an insolvency practitioner and let them deal with the creditors.

 

[London Life]

the only creditor is HMRC and the overdraft is a personal guarantee - would that still be a preference?

 

[kulture]

You owe the company £7.5k. If you paid the company the money how would you do this? Presumably into the bank. This is you settling your debt to the company. Naturally the company should apportion this payment to the creditors. It is however likely that the bank would take all of it and not let you do this......

 

[Chris Ashdown]

I would suggest using the spongbob plan and keeping the money you have to yourself

Then once the company is all done, explain your hardship to all who ask then make a offer of about 30% in cash to the bank in full and final payment, they know if they make you bankrupt the payments will drag on for ever so better to accept the offer and have it finished

If the OR calls then try and make a offer

Whatever you do dont give the money away untill its really nessasary, and then in as small amount you can get away with

If you have lots of money in a house then it may be different as they may go after that

 

[London Life]

Thanks Mr D, Chris, Kulture for replying
does the OR always get involved? - the DLA was about all i paid myself in the last 10 months. I have started another business and the spare £7.5k is from that as I have not spent a penny on myself recently while i get myself out of this mess. will probably be able to save another £1k month
DS01 due to be filed in 44 days. might just hang on to every penny i can and see what happens.
worried about the OR

 

[Mr D]

Thanks Mr D, Chris, Kulture for replying
does the OR always get involved? - the DLA was about all i paid myself in the last 10 months. I have started another business and the spare £7.5k is from that as I have not spent a penny on myself recently while i get myself out of this mess. will probably be able to save another £1k month
DS01 due to be filed in 44 days. might just hang on to every penny i can and see what happens.
worried about the OR

The OR gets involved if HMRC winds your company up.

Pretty much a certainty they will object to the application to dissolve the company, whether they spend the money to wind the business up ....

Oh and if the company does get wound up, the DLA becomes untaxed income on your personal tax return.

 

[Chris Ashdown]

Have you submittred the final accounts, if not they may not know the full position, I would suggest you follow the spongbob posts on this forum to fully understand what others have found out by experience

 

[Lisa Thomas]

Just bear in mind that if you manage to get the Company dissolved the preference could come back to bite you in future.

 

[London Life]

if i pay the directors loan back into the bank and reduce the overdraft and the OR reports this as preference what is done?. I personally have paid back my debt to the company and the company still has no assets left, and only debts in the form of an overdraft and tax owed to HMRC. What options does the OR have if they spot a preference - do they ask the bank to pay half or all the money to HMRC or is the director(me) personally liable financially for this preference?

Thanks Lisa for you time in this response - what could happen in the future?

 

[Lisa Thomas]

They pursue you for repayment

 

[London Life]

If I don't pay the DLA back would they not pursue me anyway for the amount?

 

[Chris Ashdown]

Why make any payment until you need to, there is no logical reason to do so